Dynamics Of Corporate Cash Holdings In udChinese Firms: An Empirical Investigation Of udAsymmetric Adjustment Rate And Financial udConstraints

摘要

Grounded in the notion of speed of adjustment this study investigates the adjustment rate of udcorporate cash holdings and financial constraints in Chinese firms. For this purpose data udof 867 A-listed Chinese firms over a 14 years period (2001–2014) is analysed. The study udapplies Arellano and Bond (GMM2) and Blundell and Bond (GMM1) dynamic panel data udmodel to investigate asymmetric speed of adjustment. We report considerable evidence udabout asymmetric adjustment of corporate cash holdings, i.e., downward adjustment rate udis significantly higher than upward adjustment rate. This higher downward adjustment rate udholds even after controlling for financial constraints. Moreover financial constraints also udplay an important role in dynamic cash adjustment. Financially unconstrained firms are udfound to adjust faster to their target cash holdings as compared to financially constrained udfirms. The high speed of adjustment for above target cash level firms holds even after udcontrolling for financial constraints